The International District Energy Association (IDEA) will be conducting the District Cooling 2014 conference in December in Dubai, with Empower playing the host. The conference will mark the return of IDEA to the region after four years. B Surendar in conversation with IDEA President Rob Thornton on what to expect at the meeting …

You are coming back with the IDEA conference to the Middle East after a gap of a few years. How has the District Cooling scenario changed since then? Do you see a more accommodative attitude towards District Cooling than during the aftermath of the collapse of Lehman Brothers?

Underpinning District Cooling is the fact that the region is recognising the environmental benefits of District Cooling, which is 30-40% more efficient than traditional air conditioning, which results in reduction in electricity consumption and resource conservation.

Last year, I undertook a listening tour of Qatar, Saudi Arabia, Abu Dhabi and Dubai along with the US Department of Energy. While earlier the economy was impacted by the financial crisis, there is solid prospect for growth. More than anything, some of the findings are well represented by Saudi Aramco. “If we can produce one unit of efficiency,” they said, “that’s 4.2 units of oil.”

Oil is obviously a fungible commodity in the region. The government is producing oil, but also consuming it for electricity, and 70% of the electricity is for running air conditioning, so the investment in efficiency produces an effect on the economy. It’s a uniform gain for energy efficiency.

I think there is growing recognition of energy conservation. There is a firm commitment for reducing carbon emissions and making an investment for environment protection. There is recognition for how District Cooling can deliver energy efficiency and the economic and environmental advantages.

A key issue is water conservation. During the tour of Saudi Arabia, Joe Brillhart of Johnson Controls was sharing a hybrid cooling tower technology that can operate as an air-cooled condenser and switch over to being a traditional system. This was at the Princess Noura University.

To go back to your observation about us coming back to the region after a gap of a few years, though we have not been physically present, there has been ongoing dialogue – it’s not been a vacuum. And having Empower as a host and enthusiastic support is also helpful. We are thrilled to be back with the conference and equally excited to be working with Empower.

What do you hope to achieve through the conference?

We are enthusiastic about the technology transfer and business best practices during the December conference. The bread and butter of IDEA is to bring owners, operators, suppliers, consultants, government agencies and regulators together. The growth of the industry and how the industry fits in with regulatory schemes is what it is about. Part of the conference will be about regional schemes and about global trends, such as integrating thermal energy storage (TES) and optimising the systems.

With Empower supporting the conference, do you see more doors opening to take the message to DEWA and, thus, to push for a more hospitable environment for District Cooling operators? After all, Empower is owned by DEWA and TECOM.

We are eager to share business best practices of District Cooling operators in the United States, and what type of electricity tariffs they are privy to. We would be pleased to have dialogue with utility leadership and other regulatory agencies in the UAE to share examples of the various electricity rate structures in the United States that, in fact, recognise the advantages that District Cooling and thermal storage provide to the electricity grid by shifting peak demand from expensive afternoon capacity to overnight or baseload generation.

We are hopeful we can share with appropriate bodies how District Cooling is being deployed around the world and how electric utilities and regional system operators have structured rate tariffs to stimulate investment in technologies that reduce peak demand and shift loads.

District Energy is being recognised globally as a key strategy for increasing energy efficiency to deliver climate mitigation in developing regions. IDEA has been working with the United Nations Environment Program (UNEP) under the Sustainable Energy for All (SE4All) Energy Efficiency Initiative to develop a “District Energy in Cities” platform that will also feature the importance of deploying District Cooling in emerging economies. In addition, we are in dialogue with the World Bank and International Finance Corporation to better understand their interest in District Cooling in MENA.

Please tell us more about the World Bank involvement.

This “District Energy Accelerator” was announced at the recent United Nations Climate Summit in New York City chaired by His Excellency Ban Ki-Moon. IDEA Chair Ken Smith and Empower CEO Ahmad Bin Shafar joined me at the UN in September to engage with other partnering organisations focused on District Energy for enhancing energy efficiency and cutting carbon emissions. Empower has agreed to support this initiative with the UNEP, and as a partner will share their experience in best practices for developing, deploying and optimising District Cooling systems in the harsh climates of the Middle East.

On a personal note, it was an extreme privilege to personally visit the United Nations along with Ken Smith and Ahmad Bin Shafar to hear over 30 heads of state, including President Obama and UK Prime Minister David Cameron, directly address the UN General Assembly on the importance of climate change. While my children were impressed that I saw Leonardo DiCaprio give his speech, it was very inspirational and affirming to realise the importance of our work to create more energy efficient infrastructure for the world’s cities. And the day before, I witnessed the People’s Climate March across Manhattan that brought over 400,000 people to the streets calling for action on addressing climate change. It was a busy few days in the Big Apple.

IDEA is also beginning to work with the World Bank/International Finance Corporation (IFC) to explore their interest in potentially financing District Cooling deployment across the MENA region. World Bank/IFC have been involved in financing renewal of district heating systems in Eastern Europe, and they can see the importance of increasing access to District Cooling for growing cities and urban clusters in emerging economies. IDEA is doing a briefing at World Bank IFC headquarters in Washington DC and we hope IFC will participate at our upcoming District Cooling Conference in Dubai in December.

We hope to involve the UN Environment Program and World Bank/IFC to participate in our International District Cooling Conference in Dubai in December. By bringing those two parties to the conference, they will each have the opportunity to visit world-class District Cooling facilities and interact directly with many of the industry’s leading professionals and technology providers. Secondly, we would be building capacity for increased investment in the region and potentially in locations outside of the UAE that have been eager to deploy District Cooling. It feels like there are strong synergies for people to work together on these issues and IDEA is eager to facilitate those discussions. If the UNEP District Energy Accelerator can help foster better understanding and awareness of best practices in design, development and deployment, and then the World Bank/IFC can follow on with access to early stage feasibility funding or investment capital, then we have potentially created a positive environment for more District Energy deployment.

What will be the nature of discussions at the December IDEA conference?

The conference will be more than just about pipes and wires. It will be those, but at the same time we want to look at larger global trends that can bring even more activity to the region. It will also include policy discussions, so we are all working towards energy efficiency.

We want to uncover opportunities for improvement, be it related to gas, electricity or TSE, so District Cooling is properly positioned as infrastructure investment that can deliver economy of scale. And we want to discuss how pricing can be structured to optimise both ends.

Would you be addressing the issue of customer satisfaction? For instance, there is discontent among some customers of District Cooling, which stems from the use of air-cooled rental chillers, which apparently are not able to deliver the same efficiencies as water-cooled equipment. The inefficiencies are apparently passed on to the customers, who have to pay a higher price for receiving chilled water.

I think we have a segment intended for end-users, but we might fully explore that in the next conference. We have planned a symposium on customer service, tuning of the building and optimisation on the customer side. Ken Smith, the Current Chair of IDEA, is going to be talking about activities involving customers in St Paul, Minnesota (in the US), from where he operates. At St Paul, they have worked to ensure customer optimisation.

It is important to us in District Cooling when we supply chilled water that the customers are using the right amount and are using all the BTUs they can. The process is of education, data, awareness. Frankly, it is a process the District Cooling provider needs to own.

There is a focus among IDEA members on how to get closer to customers, and there will be a discussion, and it will be a start. We hope to generate ongoing dialogue.

As for your point about customer discontent, I am not informed enough to comment on those instances, but there is intent to build up the capacity and absorb. You don’t want to be that much prior that there is a burn-rate on your capital. So I imagine part of it is just growing pains. Have developers lagged behind in delivering projects? The fact is that no one intends to burden their customers.

IDEA members are committed to building the most efficient system. You don’t want to be four years ahead. Four months is okay, so there is a start.

The District Cooling industry in the United States has built a portfolio of schemes that serve universities. Is that something you would look to promote here during the conference?

Besides in universities, we have District Cooling schemes in downtowns. We have 40 new District Cooling downtown schemes in North America, in cities like Phoenix and Chicago. The District Cooling scheme in Phoenix has doubled in size in the first six years. The PPP model is something we will certainly be touching on. I think there will be a lot of opportunities for dialogue. People, whether they are entering the market or operating more mature businesses, confront similar issues. Be it downtown or universities, the issues for District Cooling are almost universal, such as how you amortise efficient investments, how customers are not taking more than they should.

I think the magic of IDEA is to just let people meet and talk, and the conversations go beyond the boundaries of the conference. That’s what we hope to do – to facilitate interaction in the days and weeks to follow. We want to work at rebuilding the network of people that are likeminded.

How has the discovery of shale gas helped in cogeneration initiatives in the United States?

We are seeing keen interest in the US for District Energy CHP more out of recognition of its inherent qualities. In 2012, Super storm Sandy knocked out power for eight million people, but the system that stood up to Sandy was District Energy CHP, be it Princeton or Hartford Steam.

Those mayors that are keen on attracting investment are looking for local generating plants for reliability, and having low-cost gas helps cogen to be deployed, but funnily, high-cost gas can be attractive as well, because the savings are greater – that’s an odd conundrum.

Overall, we have seen a ramp-up in micro-grids and distributed generation, but natural gas pipelines are not as ubiquitous. They are going for biomass, where they do not see the situation justifying the investment in natural gas pipelines for shale gas.

At the federal level, the Department of Energy is looking at the closure of many coal plants as an opportunity to deploy CHP. Most of the recent electricity generation schemes have been about renewable energy – primarily, wind and solar. The price of PVs has dropped significantly. The electrical paradigm is shifting from large remote control stations to localised, cleaner projects.

At the federal level, there is a policy to stimulate shale gas production, and this is especially true in the Midwest, Mid-Atlantic, Pennsylvania. At the same time, shale gas is not ubiquitous. New York, for instance, has a moratorium on fracking.

Starting from the December conference, are we going to see a period of continuous engagement with the market here? Would you be conducting the conference on an annual basis?

We are not sure yet. Certainly, we hope to make it more regular, but are not decided whether to conduct it annually or once every two years.

We have to get a feel on how the market is responding. Clearly, the region is growing, and District Cooling is a growing industry, and it’s our intent to support it and to work with Tabreed, Emicool, Qatar Cool, Marafeq and, of course, Empower.

They have come to our annual conferences in the US, and they are saying, “There is sufficient value and interest to hold the conference in the region.” It will likely be annual, but I cannot say.

If you look at Dubai, it has over one million TR of District Cooling schemes being operated, and people around the world are curious to learn from the model here. They want to know about timing, capital investment and the characteristics of customers. Are the buildings occupied, or are they intermittent profiles?